There are some interesting business trends predicted for 2012, but perhaps the one that is potentially most confusing is also the most interesting.  From ABC News,

An Economic Recovery That Worsens Unemployment. How could that be? Easily, predicts Derek Thompson writing in The Atlantic. Recent months, he says, have seen the unemployment rate drop below 9 percent “for the simple reason that as many people are dropping out of the workforce as are finding work.” When the economy bounces back, he argues, those people will re-appear in the labor force by the millions, driving up the unemployment rate. “A few more jobs divided by a LOT more job seekers means a lower employment rate.” He predicts the rate “will get closer to 11 percent before it gets closer to 6.”

I can see this. I have several friends who have fallen off the unemployment rolls because of a limited time they can draw the checks. Additionally, I know people who are managing to just get by at this time without seeking other jobs.  As the economy improves, I agree that we’ll see a surge of new applicants. In fact, in my own city, we had about 50 job openings in 2011. We had about 1,100 applicants – or 22 applications for every job on average.  2012 does promise to be an interesting year if we do see an improved economy.

With the “Occupy Wall Street” movement in full swing, people are protesting the power that major banks and multinational corporations have over the democratic process.  Protesters maintain that Wall Street played a huge role in creating an economic collapse that has caused the greatest recession in generations.

It appears that perhaps their theories are not too far off, as evidenced by the charges brought against former executives of Fannie Mae and Freddie Mac by the Securities & Exchange Commission.  From CNN Money,

The suit claims that the executives knowingly approved of misleading statements, downplayed the size of their holdings of subprime loans and falsely claimed that their risky investments were minimal and manageable.

“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” SEC enforcement chief Robert Khuzami said in a statement. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books.”

While I would never wish trouble on anyone, when someone commits fraud they should face consequences. Not only should regular people be watching the outcome, but I anticipate the world will watch as well.

Dressing as homeless people and mocking the predicament of the nearly 20,000 homeowners they foreclosed on in 2010, New York law firm owned by Steven Baum apologized today for its poor taste.

After denying to the Times that employees had mocked those who had lost their homes, the firm has in recent days acknowledged the costumes were inappropriate and apologized for last year’s Halloween party.

The news comes as foreclosures continue to create a drag on the American economy and protests have erupted around the nation to protest what activists say is rampant corporate greed and influence on government that maintains a crippling disparity between rich and poor.

When a primary component of a business is to handle a large volume of foreclosures (especially when many homes have been lost due to the bad economy) and employees laughingly mock the misfortune of the people they play a role in evicting, then yes… an apology is in order. Given the thousands of people who stood in line today in middle Tennessee for a job fair… an apology is in order. If it was me – and this is only my personal opinion – I would be mortified to be seen in the law firm Halloween photos that are all over the Internet.

For the sixth week in a row, mortgage rates have dropped.  Now at 4.35 percent, this is the lowest rate Bankrate has recorded in the last 26 years.  According to the site,

One year ago, the mortgage index was 4.58 percent; four weeks ago, it was 4.46 percent.  The benchmark 15-year fixed-rate mortgage remained the same, after dropping 15 basis points last week.

While some predict that rates will not go lower, other observers believe the suffering job market may cause them to drop further.

The problem for me when there is bad economic news is it feels sometimes as if it’s ALL we talk about when it comes to finance web pages.  Mortgage rates are down, but no one is buying.  The real estate market has been in a slump for four years now. Home owners are in upside down so can’t afford to move.

While month after month of bad news has finally turned into years, another writer admits to sticking her head in the sand.  BripBlap guest writer Emily talks about lessons this economic downturn has taught her,

I stopped reading the news after I found each day’s trending articles were upsetting me so much that I couldn’t focus on my own work.  And although I am the daughter of a financial planner and have had a lifelong interest in money and investment, I have simply stopped paying any attention to the recent stream of bad news about our economy.  I don’t feel particularly mature for this attitude, but sticking my fingers in my ears and singing “la la la” seems to be working for me.

Click through and read Emily’s good advice on what to do besides sticking your head in the sand.

There is a lot of speculation about why sales remain slow in the real estate market – especially while interest rates are low and houses are very affordable.  Qualifying for a home loan is more difficult, that is true.  However given the ease in which buyers previously qualified – especially when they really could not afford to buy a home – the stricter rules are a huge necessity.

George Souto of MIddletown, Connecticut has a different theory about why sales remain slow in the very generous interest rate climate,

Until homebuyers stop being worried about a recession, fear of losing their jobs, and confidence restored in our economy, it will not make much difference how low the mortgage rates get, and home prices drop, Real Estate Recovery will most likely remain in its present state. Washington needs to restore confidence to the American people, and jobs need to once again be created. If that happens we will then see, homebuyers return to purchasing homes, and the true Recovery of the Real Estate Industry.

While I’m not an economist, I do know that the flight of jobs overseas has had an enormous impact on consumer confidence. Where our skilled labor force had been able to find jobs fairly easily, now it takes a year or five to land a manufacturing job.  And manufacturing has been a backbone of the American economy for decades. Perhaps by everyone in the nation making a concerted effort to buy American-made will send the message to industry that they are better served keeping the jobs on-shore.

While mortgage interest rates are low and while the housing market continues to offer homes at low prices, there are areas of the country that offer THE MOST affordable homes.  CNN Money explores several cities across the nation,

#1 Hunter’s Creek, Florida – What was once just a swamp in central Florida has turned into a thriving community of 12,000 residents.

#2 Lake Jackson, Texas – Dubbed the “City of Enchantment,” Lake Jackson was originally planned in the 1940s to house employees of the Dow chemical company.

#4 Johnston, Iowa – Local crime news for Johnston is telling: A recent headline proclaimed that a driver for a trash collection company spilled garbage on the highway and was issued a citation.

And my favorite (as it also happens to be MY hometown)…

#13 La Vergne, Tennessee – The high point on the calendar is the annual Old Timers’ Festival, which is expanding to three days from one in 2011 and includes midway rises, juried craft contests, a pageant and a parade, all around a “good-old-days” theme. (An event that I am helping to organize!)  (By the way, we have midway rides and juried crafters).

Congratulations to all the towns named affordable!  Especially my own little corner of Tennessee!

The drop in the credit score of the United States sent a shock wave throughout the world.  People with money invested in the stock market felt the repercussions almost immediately as the market dropped faster than a roller coaster headed south.

However according to Bryan Robertson of Los Altos, California, there is a silver lining,

* Lower energy prices: Gas, oil, etc will all drop because a weekend economy means less spending on things like driving. This means lower utility bills and more money for borrowers to save or spend.
* Lower food prices: The cost of farming and shipping food will drop as energy prices drop. This could reduce the monthly grocery bill which means more money available to stay in existing homes or homebuyers to save.
* Interest rates will stay low allowing buyers to obtain excellent 30 year loans or further reduce the cost of a loan modification. It all depends on what your mortgage is tied to. An ARM is usually tied to short-term, more volative interest rate moves and could go up.

I hope Bryan’s crystal ball is working!

Photo by Katrina Tulaio.

On the heels of yesterday’s post linking to a news story about the economy showing some improvement, another story today stated that the world economy is showing signs of distress. From Reuters,

Economists in Wednesday’s poll took an axe to the outlook for U.S. economic growth following a raft of dire jobs and industrial data this month, while keeping their long-held view for weak euro zone and UK growth until the end of next year.

Only the Japan saw an upgraded outlook in the latest poll thanks to reconstruction efforts that have gained pace since the March 11 earthquake and tsunami.

So who do you believe?  Are we recovering? Is the economy worsening? How about we just live. Function. Move forward. Spend time with our families.  Stop and smell the roses.  Hug a kid. Eat some chocolate.  Get on with life.

While the housing market crashed a couple of years ago – and the blame was shared by many – my personal belief is that the full depression recession began when gas prices jumped to over $4 p/gallon in middle America.

Relief (for now) seems to be in sight.  According to MSNBC.com, the Labor Department is reporting a fall in food prices.  Additionally, gas prices are coming down according to AAA.

Lower food and gas prices “should provide some near-term relief,” Vitner said, “but a sustainable pickup in spending will not likely occur until job growth picks up and the unemployment rate falls.”

There were some encouraging signs that hiring could pick up in the second half of the year.

An eternal optimist, I shall remain hopeful the economists are right!